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The town was first settled by Missourians in 1849 and in the 1850s served as a trading center for a number of mining camps in the area. The town also had one of the largest Chinese communities in the state (over 2,000 in the 1860 census).

At the time of its founding, placer mining was the most popular mining technique, which is heavily dependent on water. The local water source, Dry Creek, ran dry during the summer months, during which time the miners were said to be "fiddling around," thus the name. However, one local citizen was embarrassed to be known as the "Man from Fiddletown" and successfully lobbied to have the name changed to Oleta (after his daughter) in 1878. After his death in 1932, town residents petitioned to have it restored to Fiddletown.